Polymarket scandalous: 25% of trades artificially inflated!

Polymarket scandalous: 25% of trades artificially inflated!

A recent study from Columbia University has published alarming findings about trading activity on prediction platform Polymarket. This research, conducted by Yash Kanoria and his team at Columbia Business School, shows that a significant portion of trading volume was artificially inflated through so-called wash trading. According to the study, this manipulative trading strategy, which is particularly pronounced in sports markets, accounts for approximately 25% of all transactions on Polymarket in the last three years.

The analysis revealed that several market segments are affected by wash trading. In sports markets, 45% of the total trading volume can be attributed to such trades, while in election markets 17%, in political markets 12% and in crypto-related markets only 3% are influenced by wash trading. The researchers noted that Polymarket is not directly responsible for the manipulation, but the platform could create conditions that enable these practices.

Growth of Polymarket

Despite these serious allegations, Polymarket is experiencing strong growth. The platform increased its active merchant numbers to over 477,000 in October 2023 - a 48% increase compared to the previous month. Total trading volume exceeded $3 billion, doubling September figures. This surge coincides with the announcement of the POLY token and an accompanying airdrop.

A spokesperson for Polymarket commented on the study's findings, saying the company was reviewing them but would not comment further. The platform has also announced plans to return to the US market after previous regulatory restrictions from the Commodity Futures Trading Commission hampered activity. This renewal could help increase confidence in Polymarket’s trading practices.

Market competition and trends

Polymarket's success is part of a broader boom in the prediction markets space. Rival platform Kalshi also recorded significant trading volumes in the same period, exceeding $4.4 billion. This growth in the sector suggests that prediction markets are becoming increasingly important and attracting investors, despite market regulatory challenges.

Overall, the Columbia University study raises important questions about the integrity of trading on Polymarket. It remains to be seen how the platform will respond to these revelations and what measures it can take to ensure transparency and fairness in its markets. The findings highlight the need for regulators to take preventive measures to prevent market manipulation and increase user trust in this innovative form of trading.